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It's interesting that the cause for spiraling CEOs salary is similar to the cause of spiraling Civil Service salaries over the past 30 years. In both cases comp

It's interesting that the cause for spiraling CEOs salary is similar to the cause of spiraling Civil Service salaries over the past 30 years. In both cases compensation is not based on performance but rather on what others in similar positions are receiving and control of the compensation process. In corporations there will be board compensation committees that hire outside compensation consultants. The consultants will come back with a suggested salary that is the current standard for similar companies plus an additional amount to insure that they "get the best". There are only a small group of such consulting companies and it is in their self interest to inflate executive salaries. Suggesting lower salaries would mean a loss of future business because it is the very same executives that hire them. For civil service contracts their will be independent government boards set up to negotiate salaries. To insure that the boards are independent they are usually constituted using a political process. As a baseline for salaries they will use formulas based on what other unions make plus a little something extra because "well everyone deserves a raise". As with the executive compensation committee, it is in the self interest of the government compensation boards to be generous. The government boards are appointed positions based on the party in power. Given the capabilities of unions in voter organization, it is fair to say that they at least indirectly hire the compensation board members. The net result in both cases is spiraling salaries that have no relation to performance.

api 15y ago
The right likes to scream about this phenomenon in civil service. The left likes to scream about it in the private sector. Incredibly good point... it's the same phenomenon. We need -- collectively -- in all spheres -- to take a good look at some people and start asking questions like "what exactly is it that you do here? what value do you create that is commensurate with your salary?" In government this has to happen at the management or political level. In the private sector this needs to happen via shareholder pressure. If shareholders had a brain, they would start agitating for long-term merit-based CEO pay.
- maratd 15y ago
  The best solution, in both the government and private sector, is to keep things small. Smaller governments and smaller companies. On the small scale, it's very easy to ask "what exactly is it that you do here?" to everyone involved in the entity.
  - jtbigwoo 15y ago
    Small companies don't generally change the world until they become big companies.
    - maratd 15y ago
      Wrong order. Small companies change the world and as a result, become big companies. Such is the nature of the beast.
- gph 15y ago
  Ah, but not all shareholders are in it for long-term gain, so they don't necessarily want a CEO that aims for the long-term. And even those that are technically in it for the long-term are hand their money off to Fund Managers, who as recent times have shown aren't that great at long-term investment either.
jbooth 15y ago
I think you need to be a lot more specific in what you're talking about with regard to civil service salaries. I've actually been on municipal boards negotiating with unions and the salaries definitely were not going up more than inflation. But the amount we were spending on employees was in fact skyrocketing. You know why? Health insurance. Any study showing you one number and omitting the fact that none of that increase actually goes into employees' pockets is lying to you.
kbutler 15y ago
Add non-profits to this list. The same mechanisms are in place, and executive compensation in non-profits is routinely compared to that in "a company of similar size".
vannevar 15y ago
Except that civil service salaries haven't been spiraling at all. Since 1969 they've gone up 428%, yet the consumer price index has risen 477%. See http://assets.opencrs.com/rpts/94-971_20100120.pdf http://assets.opencrs.com/rpts/94-971_20100120.pdf . Meanwhile CEO compensation has more than quadrupled just since 1989. See http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historical-chart.html http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historic... .
- forgotAgain 15y ago
  The public payroll information for my state is available through the website http://seethroughny.net/ http://seethroughny.net/. For 2010 there were over 116,000 public employees who made $100k.
  - vannevar 15y ago
    I'm not sure what your point is. Would it bother you less if they were all contractors? You live in New York, the 3rd most populous state in the country, so it follows that you would have a lot of civil servants compared to say, Alaska. Nothing in your statement provides any evidence that civil service salaries are rising beyond inflation.
  - wisty 15y ago
    A lot of those 116,000 public employees will be managers, or skilled professionals (engineers? doctors? no idea). A public service manager working a 60 hour week would probably make a similar amount in the private sector, and no, they don't have easier jobs. Their jobs are often kind of meaningless (dealing with lots of politics and bureaucracy), but that doesn't make them easy. If it's anything like Australia, it's low-level public servants who have the best pay. They typically have very little responsibility, great conditions (public execs have unlimited work hours, but non-execs have fixed hours) and no-one competes for their job because it's hard to get your foot in the door. OK, looking at the data, there's a lot of "stationary engineers" and "sewage treatment workers" on high pay points. No idea why. Maybe they have a very strong union, or it could be a data error. Or maybe it includes some kind of payout, after a bunch of "stationary engineers" were injured?

api 15y ago

The right likes to scream about this phenomenon in civil service. The left likes to scream about it in the private sector. Incredibly good point... it's the same phenomenon. We need -- collectively -- in all spheres -- to take a good look at some people and start asking questions like "what exactly is it that you do here? what value do you create that is commensurate with your salary?" In government this has to happen at the management or political level. In the private sector this needs to happen via shareholder pressure. If shareholders had a brain, they would start agitating for long-term merit-based CEO pay.

maratd 15y ago
The best solution, in both the government and private sector, is to keep things small. Smaller governments and smaller companies. On the small scale, it's very easy to ask "what exactly is it that you do here?" to everyone involved in the entity.
- jtbigwoo 15y ago
  Small companies don't generally change the world until they become big companies.
  - maratd 15y ago
    Wrong order. Small companies change the world and as a result, become big companies. Such is the nature of the beast.
gph 15y ago
Ah, but not all shareholders are in it for long-term gain, so they don't necessarily want a CEO that aims for the long-term. And even those that are technically in it for the long-term are hand their money off to Fund Managers, who as recent times have shown aren't that great at long-term investment either.

jbooth 15y ago

I think you need to be a lot more specific in what you're talking about with regard to civil service salaries. I've actually been on municipal boards negotiating with unions and the salaries definitely were not going up more than inflation. But the amount we were spending on employees was in fact skyrocketing. You know why? Health insurance. Any study showing you one number and omitting the fact that none of that increase actually goes into employees' pockets is lying to you.

kbutler 15y ago

Add non-profits to this list. The same mechanisms are in place, and executive compensation in non-profits is routinely compared to that in "a company of similar size".

vannevar 15y ago

Except that civil service salaries haven't been spiraling at all. Since 1969 they've gone up 428%, yet the consumer price index has risen 477%. See http://assets.opencrs.com/rpts/94-971_20100120.pdf http://assets.opencrs.com/rpts/94-971_20100120.pdf . Meanwhile CEO compensation has more than quadrupled just since 1989. See http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historical-chart.html http://www.forbes.com/lists/2011/12/ceo-pay-20-year-historic... .

forgotAgain 15y ago
The public payroll information for my state is available through the website http://seethroughny.net/ http://seethroughny.net/. For 2010 there were over 116,000 public employees who made $100k.
- vannevar 15y ago
  I'm not sure what your point is. Would it bother you less if they were all contractors? You live in New York, the 3rd most populous state in the country, so it follows that you would have a lot of civil servants compared to say, Alaska. Nothing in your statement provides any evidence that civil service salaries are rising beyond inflation.
- wisty 15y ago
  A lot of those 116,000 public employees will be managers, or skilled professionals (engineers? doctors? no idea). A public service manager working a 60 hour week would probably make a similar amount in the private sector, and no, they don't have easier jobs. Their jobs are often kind of meaningless (dealing with lots of politics and bureaucracy), but that doesn't make them easy. If it's anything like Australia, it's low-level public servants who have the best pay. They typically have very little responsibility, great conditions (public execs have unlimited work hours, but non-execs have fixed hours) and no-one competes for their job because it's hard to get your foot in the door. OK, looking at the data, there's a lot of "stationary engineers" and "sewage treatment workers" on high pay points. No idea why. Maybe they have a very strong union, or it could be a data error. Or maybe it includes some kind of payout, after a bunch of "stationary engineers" were injured?